5 ms·

Because nobody profits off the time/value of money nearly as much as the banks do. If transactions were "instant" the bank wouldn't be able to kite your money.

Because nobody profits off the time/value of money nearly as much as the banks do. If transactions were "instant" the bank wouldn't be able to kite your money. There really is no reason transactions need to take as long as they do other than that money disappears from one account and re-appears two days later in another account. In the meantime those funds are still a part of the bank's bottom line. It's not technically yours, and it's not technically the other account holders.... but the bank still possesses it. And the amount of money the bank has "floating" around probably coincidentally lines up pretty closely with a sum of money the bank has invested in high-risk investments. Banks are essentially legal "Kiting centers" where they get to kite everyone elses money because it's federally insured anyway.

jdm2212 7y ago
That's a pretty wild claim. Do you have any sources to support it?
- rrauenza 7y ago
  How about this article from 1985(!): https://www.nytimes.com/1985/05/27/business/squeezing-profits-from-float.html https://www.nytimes.com/1985/05/27/business/squeezing-profit...
- lostgame 7y ago
  I work at a major bank in Canada and can confirm this is the case. There is - confirmed here by a dev - at least in our instance, absolutely no technical reason why transactions can not happen immediately. It is an intentionally-staggered process for bureaucratic purposes, certainly.
vanderZwan 7y ago
> There really is no reason transactions need to take as long as they do other than that money disappears from one account and re-appears two days later in another account. Well, that and legacy systems that run batch jobs in COBOL at midnight to do the bank-to-bank transfers: > Roughly 80% of their systems are batch jobs. These are jobs that runs at a certain time or interval, doing some processing on their data or sends data to other banks/agencies/etc. For example when I buy a can of Coke, the money is withdrawn from my account balance, however the money is not actually transferred anywhere until one of their batch jobs does so. These jobs are usually executed during the night, which is usually why it takes a day before transactions between banks are completed. Transactions to the same bank are usually instant because it executes immediately. https://hackerfall.com/story/interviewing-my-mother-a-mainframe-cobol-programme https://hackerfall.com/story/interviewing-my-mother-a-mainfr... Also, that interview convinced me that the busfactor of the entire Swedish economy is a handful of old Cobol programmers.
- spookthesunset 7y ago
  If US banks wanted free, instant inter-bank transfers, it would exist already. Moving out of legacy systems is an engineering problem that can easily be solved with enough willpower. Don't let banks blame their legacy systems -- that is an excuse.
  - hodgesrm 7y ago
    Bank user here. Free is fine but instant inter-bank transfers are bad. That means somebody can just empty the account with limited ability for the owner/bank to intercept the transaction. I'm quite happy with the current semantics, so far as I understand them.
    - raverbashing 7y ago
      Liability and reversibility have nothing to do with how quickly or slowly the operation happens.
- perl4ever 7y ago
  I've had cognitive dissonance for years, because in every basic database programming class, they tell you about transactions, and use the example of transferring money from one account to another, where you don't want the system to be in an inconsistent state. Yet nothing in the real world works like that! I've particularly noticed how money being transferred between two different financial firms can either disappear for a few days, or be in both places at once. Not sure if it's happening more or I'm noticing it more.
  - manigandham 7y ago
    Yes, banking is always mis-used as an example for transactions and ACID but in reality it's eventually consistent, often spanning hours, days, and sometimes weeks. The real-world needs to account for laws, geographies, timezones, physical movement of goods and cash, risk management, etc. that is not modeled in a simplistic database class. I do wish they would pick a different domain to avoid this confusion.
notfromhere 7y ago
Banks don't put your cash in high-risk investments, they put it in market funds to gains a few points
- sb057 7y ago
  The point is, in this window they haven't put it anywhere yet.
adrr 7y ago
Your reasoning is so far off. Banks don’t control how long it takes to move money, the fed does. Move money between accounts at the same bank, money transfer is instant. Banks can’t kite money with ACH either, that’s why overnight lending market exists to cover between debits and credits even if they are break even for the bank.
- spookthesunset 7y ago
  > Banks don’t control how long it takes to move money, the fed does. If the banks really wanted to lobby the government and change whatever laws or regulations keep them from offering instant, free transfers.... they'd have done so already. The fact that the US doesn't have instant, free inter-bank transfers is 100% on the banks. In fact, I bet they lobby the shit out of the government to keep it slow and expensive.
  - adrr 7y ago
    You don't understand how the banking system works. Fed holds the balance of every bank. That is what is getting updated every night when you move money between banks. Banks want faster processing and settlement time because it de-risks them. There is less risk of check kiting and other scenarios where customer is spending money that doesn't exist. Bank listed in article is on the hook for $26 million because transfers and settlements aren't instant.
- tzs 7y ago
  > Your reasoning is so far off. Banks don’t control how long it takes to move money, the fed does. Move money between accounts at the same bank, money transfer is instant. Banks can be pretty silly with accounts at the same bank, too. A friend of mine finished a contract job at a major defense contractor, which had a lump sum payment at the end. The company wrote him a large check, drawn on their account at the local branch of a major bank. What he wanted to do was (1) open a checking account at that bank, (2) deposit about 95% of the check in that new account, and (3) take the remaining 5% as cash, for first and last month's rent at an apartment he wanted to rent that afternoon. The bank could not do that. Even though the check was drawn on an account at that branch, they said it would still take three days to clear, so he would have to wait for the cash. Finally, he ended up going to a teller and asking to cash the check. That, of course, worked, although it was a big enough check that it apparently triggered some safeguards that required getting a couple of levels of management above the teller involved, and so it took about an hour for them to actually hand him the cash. He then took his cash, set aside 5% for getting that apartment he wanted, and took the remaining 95% back to the new accounts desk, and said "I want to open a checking count here, and deposit this cash".

jdm2212 7y ago

That's a pretty wild claim. Do you have any sources to support it?

rrauenza 7y ago
How about this article from 1985(!): https://www.nytimes.com/1985/05/27/business/squeezing-profits-from-float.html https://www.nytimes.com/1985/05/27/business/squeezing-profit...
lostgame 7y ago
I work at a major bank in Canada and can confirm this is the case. There is - confirmed here by a dev - at least in our instance, absolutely no technical reason why transactions can not happen immediately. It is an intentionally-staggered process for bureaucratic purposes, certainly.

vanderZwan 7y ago

> There really is no reason transactions need to take as long as they do other than that money disappears from one account and re-appears two days later in another account. Well, that and legacy systems that run batch jobs in COBOL at midnight to do the bank-to-bank transfers: > Roughly 80% of their systems are batch jobs. These are jobs that runs at a certain time or interval, doing some processing on their data or sends data to other banks/agencies/etc. For example when I buy a can of Coke, the money is withdrawn from my account balance, however the money is not actually transferred anywhere until one of their batch jobs does so. These jobs are usually executed during the night, which is usually why it takes a day before transactions between banks are completed. Transactions to the same bank are usually instant because it executes immediately. https://hackerfall.com/story/interviewing-my-mother-a-mainframe-cobol-programme https://hackerfall.com/story/interviewing-my-mother-a-mainfr... Also, that interview convinced me that the busfactor of the entire Swedish economy is a handful of old Cobol programmers.

spookthesunset 7y ago
If US banks wanted free, instant inter-bank transfers, it would exist already. Moving out of legacy systems is an engineering problem that can easily be solved with enough willpower. Don't let banks blame their legacy systems -- that is an excuse.
- hodgesrm 7y ago
  Bank user here. Free is fine but instant inter-bank transfers are bad. That means somebody can just empty the account with limited ability for the owner/bank to intercept the transaction. I'm quite happy with the current semantics, so far as I understand them.
  - raverbashing 7y ago
    Liability and reversibility have nothing to do with how quickly or slowly the operation happens.
perl4ever 7y ago
I've had cognitive dissonance for years, because in every basic database programming class, they tell you about transactions, and use the example of transferring money from one account to another, where you don't want the system to be in an inconsistent state. Yet nothing in the real world works like that! I've particularly noticed how money being transferred between two different financial firms can either disappear for a few days, or be in both places at once. Not sure if it's happening more or I'm noticing it more.
- manigandham 7y ago
  Yes, banking is always mis-used as an example for transactions and ACID but in reality it's eventually consistent, often spanning hours, days, and sometimes weeks. The real-world needs to account for laws, geographies, timezones, physical movement of goods and cash, risk management, etc. that is not modeled in a simplistic database class. I do wish they would pick a different domain to avoid this confusion.

notfromhere 7y ago

Banks don't put your cash in high-risk investments, they put it in market funds to gains a few points

sb057 7y ago
The point is, in this window they haven't put it anywhere yet.

adrr 7y ago

Your reasoning is so far off. Banks don’t control how long it takes to move money, the fed does. Move money between accounts at the same bank, money transfer is instant. Banks can’t kite money with ACH either, that’s why overnight lending market exists to cover between debits and credits even if they are break even for the bank.

spookthesunset 7y ago
> Banks don’t control how long it takes to move money, the fed does. If the banks really wanted to lobby the government and change whatever laws or regulations keep them from offering instant, free transfers.... they'd have done so already. The fact that the US doesn't have instant, free inter-bank transfers is 100% on the banks. In fact, I bet they lobby the shit out of the government to keep it slow and expensive.
- adrr 7y ago
  You don't understand how the banking system works. Fed holds the balance of every bank. That is what is getting updated every night when you move money between banks. Banks want faster processing and settlement time because it de-risks them. There is less risk of check kiting and other scenarios where customer is spending money that doesn't exist. Bank listed in article is on the hook for $26 million because transfers and settlements aren't instant.
tzs 7y ago
> Your reasoning is so far off. Banks don’t control how long it takes to move money, the fed does. Move money between accounts at the same bank, money transfer is instant. Banks can be pretty silly with accounts at the same bank, too. A friend of mine finished a contract job at a major defense contractor, which had a lump sum payment at the end. The company wrote him a large check, drawn on their account at the local branch of a major bank. What he wanted to do was (1) open a checking account at that bank, (2) deposit about 95% of the check in that new account, and (3) take the remaining 5% as cash, for first and last month's rent at an apartment he wanted to rent that afternoon. The bank could not do that. Even though the check was drawn on an account at that branch, they said it would still take three days to clear, so he would have to wait for the cash. Finally, he ended up going to a teller and asking to cash the check. That, of course, worked, although it was a big enough check that it apparently triggered some safeguards that required getting a couple of levels of management above the teller involved, and so it took about an hour for them to actually hand him the cash. He then took his cash, set aside 5% for getting that apartment he wanted, and took the remaining 95% back to the new accounts desk, and said "I want to open a checking count here, and deposit this cash".